# This Cannot Be Good For Any Of Us? Now The Bean Counters Are Involved.



## MDSPHOTO (Sep 10, 2013)

2009 law that raised federal taxes on tobacco products to discourage smoking triggered a market shift to pipe tobacco and large cigars, costing the U.S. Treasury billions in lost revenue, according to a GAO report obtained by NBC News. In some instances, it took little more than a label change to qualify for the lower tax rate, it said.
The Government Accountability Office study, which will be the focus of a congressional hearing on Tuesday, found that Children's Health Insurance Program Reauthorization Act (CHIPRA) drove manufacturers and price-conscious consumers to gravitate to pipe tobacco and so-called large cigars because it taxed them at lower rates than cigarettes, small cigars and roll-your-own tobacco.

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Among what the report labeled "tax avoidance" measures were reclassifying roll-your-own tobacco as pipe tobacco, "with minimal differences in the packaging and the appearance of the tobacco itself," and slightly increasing the weight of so-called small cigars to qualify for the lower large-cigar tax rate.







U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Examples of cigarette and cigar products.The changes translated to a loss of between $2.6 billion and $3.7 billion in federal taxes from April 2009 through February 2014, the GAO found. By comparison, the U.S. Treasury collected about $77 billion in tobacco product taxes over the same period, it said.
"This is a classic case of tax evasion that's being fueled by a lapse in good government," said Senate Finance Committee Chairman Ron Wyden, D-Ore, who will chair Tuesday's hearing. "As a result, the country has taken a hit worth billions of dollars, and children and teens have easier access to tobacco. It's time for the Senate Finance Committee to look at solutions to close this loophole for good."
In a statement provided to NBC News, the Altria Group, parent company of tobacco manufacturer Philip Morris, said it endorses calls to equalize the tax rate for different products, saying that "little cigars and roll-your-own tobacco should pay the same tax as cigarettes, as Congress intended. "
It also stated that "our companies do not make little cigars or RYO (roll-your-own) tobacco and have not changed our products to fit into different tax classifications."

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Bryan D. Hatchell, a spokesman for R.J. Reynolds Tobacco Co., said, "Once the report is issued, we look forward to reviewing it and seeing what policy recommendations the GAO presents to effectively deal with this problem."
Bob Bannon, director of investor relations with the Lorrilard tobacco company, declined to comment on the GAO report.
The report noted that while CHIPRA raised tax rates on all types of tobacco products, it raised the rate on pipe tobacco and large cigars by a lesser amount, creating a substantial tax disparity easily visible to consumers.
In the case of loose tobacco for use in pipes or rolling machines, the change resulted in a tax differential of $21.95 per pound in favor of pipe tobacco - a big incentive for price-conscious smokers to alter their buying behavior. For example, GAO investigators who visited a Washington, D.C., smoke shop in April purchased a 6-ounce bag of pipe tobacco for $13.77, while a same-size bag of roll-your-own tobacco cost $26.49.
For cigars, the determination of whether they are considered "small" or "large" for purposes of taxation is determined only by weight - with anything above 3 pounds per 1,000 considered large. That enabled manufacturers of small cigars, which resemble cigarettes but are wrapped in tobacco leaves, to qualify for the lower tax rate by making their products slightly heavier, in some cases by packing the tobacco more tightly. Some manufacturers also changed their labels from "small cigars" to "filtered cigars" or simply "cigars," while often continuing with the same packaging and design, the report said.
Direct comparisons between cigar tax rates are more difficult to calculate, as small cigars are taxed at a rate of $50.33 per thousand sticks - the same rate as cigarettes - while large cigars are taxed at a rate of 52.75 percent of the manufacturer's or importer's sale price. But the GAO said a manufacturer of cigars costing $50 per thousand would realize a tax savings of $23.95 per thousand by qualifying the product as large.
*Follow NBC News Investigations on Twitter and Facebook.*

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It also noted that the change had an immediate impact on the tobacco marketplace, with total annual sales of large cigars growing from about 5.8 billion in fiscal 2008 to more than 12.4 billion in fiscal 2013 - an increase of about 115 percent. That surge also was reflected in an 88 percent decline in small cigar sales over the same period, it said.
The GAO did not issue any formal recommendations in its report, but indicated it stood by its previous recommendation that Congress consider equalizing tax rates to reduce or eliminate the differentials.


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## tmoran (Mar 25, 2014)

Yeah, I read this article yesterday. It boils my blood the way they say they "lost" about $3 billion in revenue, when in reality they gained about $77 billion.


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## MDSPHOTO (Sep 10, 2013)

tmoran said:


> Yeah, I read this article yesterday. It boils my blood the way they say they "lost" about $3 billion in revenue, when in reality they gained about $77 billion.


Agreed and as much as the govt claims to want to get rid of tobacco how pray tell would they plan to make up $77B in lost revenue to support themselves?


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## tmoran (Mar 25, 2014)

MDSPHOTO said:


> Agreed and as much as the govt claims to want to get rid of tobacco how pray tell would they plan to make up $77B in lost revenue to support themselves?


I don't intend to turn this into a political debate, but it is worth mentioning that this is the same thing that happened with oil taxes. Everybody is driving more fuel efficient cars, which I think is great, but governments are now dealing with a shortage in funds because of less tax revenue from less oil consumption.


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## Tobias Lutz (Feb 18, 2013)

MDSPHOTO said:


> Agreed and as much as the govt claims to want to get rid of tobacco how pray tell would they plan to make up $77B in lost revenue to support themselves?


Why obviously they're going to recoup it from the savings on medical bills by reducing all the evil health conditions caused by tobacco :biggrin:


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## MDSPHOTO (Sep 10, 2013)

Tobias Lutz said:


> Why obviously they're going to recoup it from the savings on medical bills by reducing all the evil health conditions caused by tobacco :biggrin:


Obamacare will save us all.


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## tnlawyer (Jul 17, 2013)

This country is screwed beyond repair. Seriously considering taking my ducats and relocating in the next 10 years.


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## Cigar-Enthusiast (Feb 2, 2014)

tnlawyer said:


> This country is screwed beyond repair. Seriously considering taking my ducats and relocating in the next 10 years.


I think there is still hope! All we need is a great leader willing to make reforms.

Just curious, where do you plan on going?


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## tnlawyer (Jul 17, 2013)

Cigar-Enthusiast said:


> I think there is still hope! All we need is a great leader willing to make reforms.
> 
> Just curious, where do you plan on going?


Looking at a few places. Cambodia, Panama, and the DR are on the short list and in that order.


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## Tobias Lutz (Feb 18, 2013)

tnlawyer said:


> Looking at a few places. Cambodia, Panama, and the DR are on the short list and in that order.


DRlawyer has a nice ring to it :biggrin:


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## tnlawyer (Jul 17, 2013)

Tobias Lutz said:


> DRlawyer has a nice ring to it :biggrin:


:lol: Cigars would be much easier to come by there than in Cambodia.


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## Cigar-Enthusiast (Feb 2, 2014)

tnlawyer said:


> Looking at a few places. Cambodia, Panama, and the DR are on the short list and in that order.


Interesting. I was thinking of you were going to say New Zealand or something to that nature.
Care to explain why? I have family in the DR who say it's not a very nice place to live due to poverty. There is also a new illness there that's attacking people's joints.


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## Tobias Lutz (Feb 18, 2013)

tnlawyer said:


> :lol: Cigars would be much easier to come by there than in Cambodia.


Ah, but it would be all the harder to get opium :lol:

"The horror, the horror."


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## tnlawyer (Jul 17, 2013)

Cigar-Enthusiast said:


> Interesting. I was thinking of you were going to say New Zealand or something to that nature.
> Care to explain why? I have family in the DR who say it's not a very nice place to live due to poverty. There is also a new illness there that's attacking people's joints.


Been to all 3 places multiple times and am very fond of all 3 places. Easy to live fairly comfortably in either place and for not a lot of money. Plus for the most part you're left to your own devices. Poverty exists across the globe.


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## tnlawyer (Jul 17, 2013)

Tobias Lutz said:


> Ah, but it would be all the harder to get opium :lol:
> 
> "The horror, the horror."


Never heard much about opium around there, but the number of "happy pizza" places was staggering. :biggrin:


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## Tobias Lutz (Feb 18, 2013)

David,

My apologies for going so far into the left field... now back to your regularly scheduled thread :yo:

I have written my letters to my congressmen and I use a bill tracker alert system to get notified of sponsorship changes and movement of legislation related to premium tobacco. I'm done worrying about it (it also helps to have 120lbs of pipe tobacco stored up :wink: )


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## Emperor Zurg (May 6, 2013)

tmoran said:


> Yeah, I read this article yesterday. It boils my blood the way they say they "lost" about $3 billion in revenue, when in reality they gained about $77 billion.


x10

The greedy vermin never seem terribly concerned about my 'Lost Revenue' when they jack up my taxes.


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## Tritones (Jun 23, 2010)

Emperor Zurg said:


> x10
> 
> The greedy vermin never seem terribly concerned about my 'Lost Revenue' when they jack up my taxes.


That's because of all the entertainment you get for your tax dollars ...


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## brimy623 (May 25, 2013)

Cigar-Enthusiast said:


> I think there is still hope! All we need is a great leader willing to make reforms.


The way our government is structured a "great leader" is unable to do anything without the support of the congress, fear IMPEACHMENT and ridicule for not allowing them (congress) to sit on their hands!

And then you get one willing to take the ridicule and threats of impeachment and he/she is vilified.

The big business and their lobbyist run this country! They don't really give a $hit about the "little guys".

sorry, off my soap box.


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## MDSPHOTO (Sep 10, 2013)

Tritones said:


> That's because of all the entertainment you get for your tax dollars ...


Yep, ole Hank Johnson one of Georgia's finest elected officials.


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## Emperor Zurg (May 6, 2013)

Duplicate


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## Emperor Zurg (May 6, 2013)

Tritones said:


> That's because of all the entertainment you get for your tax dollars ...


Good lord. And a majority of voters actually elected that imbecile? Who or what ran against him? A literal jackass?


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## Tritones (Jun 23, 2010)

Emperor Zurg said:


> Tritones said:
> 
> 
> > That's because of all the entertainment you get for your tax dollars ...
> ...


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## Tritones (Jun 23, 2010)

Maybe I can get a grant to study the geological undergirdings of Guam to determine whether they are sufficient to keep the island upright in the event of a population increase.

$3 billion or so should do it ...


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## Tobias Lutz (Feb 18, 2013)

Tritones said:


> Maybe I can get a grant to study the geological undergirdings of Guam to determine whether they are sufficient to keep the island upright in the event of a population increase.
> 
> $3 billion or so should do it ...


Unfortunately, as much as both parties agree action must be taken to avoid irreversible catastrophe... the house is only going to approve a quarter of that request and, at best, the senate will give you a third :lol:


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## Emperor Zurg (May 6, 2013)

Tobias Lutz said:


> Unfortunately, as much as both parties agree action must be taken to avoid irreversible catastrophe... the house is only going to approve a quarter of that request and, at best, the senate will give you a third :lol:


Besides, Ol Hank J seems pretty sure it's floating. Don't all islands just float on the ocean?

Undergirdings indeed. Who you trying to scam here?


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## Branzig (Jul 14, 2013)

tmoran said:


> Yeah, I read this article yesterday. It boils my blood the way they say they "lost" about $3 billion in revenue, when in reality they gained about $77 billion.


Little late to the conversation but this is easy.

They'll get rid of the evil tobacco to legalize weed. $77 billion lost on tobacco, $177 billion gained on the ganja.

WA state made over 500k in state revenue in 3 days off legalized weed :lol:


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## Cardinal (Jun 14, 2013)

Tritones said:


> That's because of all the entertainment you get for your tax dollars ...


"...at the least widest part...and uh, my fear is that, uh..the whole island will become so overpopulated that it will, uh, tip over and capsize..."

"We don't anticipate that, sir."

:jaw:

Well, hopefully this guy is in charge of any new tobacco regs.


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## Tritones (Jun 23, 2010)

Tobias Lutz said:


> Unfortunately, as much as both parties agree action must be taken to avoid irreversible catastrophe... the house is only going to approve a quarter of that request and, at best, the senate will give you a third :lol:


That was built into my calculations. Even a third of a quarter comes out to $250 million. Tax free since it's a government grant. Plenty to buy an island anywhere I'd care to live.



Emperor Zurg said:


> Besides, Ol Hank J seems pretty sure it's floating. Don't all islands just float on the ocean?
> 
> Undergirdings indeed. Who you trying to scam here?


Good point. I'll have to revise my pitch to say I'll research the seaworthiness of Guam at various population densities.


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## Emperor Zurg (May 6, 2013)

Tritones said:


> Good point. I'll have to revise my pitch to say I'll research the seaworthiness of Guam at various population densities.


Damn straight.
Besides, everyone knows rock floats if you get enough of it all together in one place.


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## CeeGar (Feb 19, 2007)

Cardinal said:


> "...at the least widest part...and uh, my fear is that, uh..the whole island will become so overpopulated that it will, uh, tip over and capsize..."
> 
> "We don't anticipate that, sir."
> 
> ...


The local morning radio shows had a field day with this one when it happened. I can't find a facepalm emoticon big enough for 'ol Hank.


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## Cardinal (Jun 14, 2013)

CeeGar said:


> The local morning radio shows had a field day with this one when it happened. I can't find a facepalm emoticon big enough for 'ol Hank.


lol I can only imagine. Does he keep getting elected or was it a one-time, corrected mistake?


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## CeeGar (Feb 19, 2007)

Cardinal said:


> lol I can only imagine. Does he keep getting elected or was it a one-time, corrected mistake?


He was born and raised in D.C....that should tell you something. Lol. Unfortunately, he is still there. Believe it or not, he is probably better than his predecessor. I'll let you do the research on her if you dare.


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## LewZephyr (Aug 2, 2013)

Tritones said:


> That's because of all the entertainment you get for your tax dollars ...


The fact that this guy is an Elected Official made me want to throw up.
I cannot imagine how on earth he could of been put in office.
Sad thing is, there are way too many of these in office on both sides of the isle.


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## Tritones (Jun 23, 2010)

LewZephyr said:


>


When you get face-palmed by Schultz, you've hit rock-bottom.


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## JustinThyme (Jun 17, 2013)

If the taxes were hiked in the first place to discourage smoking who is to say it isn't working? I know I added to the quit list for cigarettes and most of the people I know who smoked have quit. So now they are saying its because of tax evasion and are looking to make up for what was never to be? Wonder how much time and money was spent on the BS they published.......

http://well.blogs.nytimes.com/2013/...s-are-at-new-lows/?_php=true&_type=blogs&_r=0


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